| GROWTH RATE
| TOP COMPANY(Rs crore)
| COMPANY SHARE(Rs crore)
| RELATIVE MKT SHARE
| IDEA CELLULAR
| 11.00 %
ADITYA BIRLA MONEY
| GRASIM INDUSTRIES LTD.
BCG matrix has 2 dimensions: market share and market growth while divided in Four categories. Placing products in the BCG matrix results in 4 categories in a portfolio of a company: 1. Stars (=high growth, high market share)
- use large amounts of cash and are leaders in the business so they should also generate large amounts of cash. - frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold share, because the rewards will be a cash cow if market share is kept. 2. Cash Cows (=low growth, high market share)
- profits and cash generation should be high , and because of the low growth, investments needed should be low. Keep profits high - Foundation of a company
3. Dogs (=low growth, low market share)
- avoid and minimize the number of dogs in a company.
- beware of expensive ‘turn around plans’.
- deliver cash, otherwise liquidate
4. Question Marks (= high growth, low market share)
- have the worst cash characteristics of all, because high demands and low returns due to low market share - if nothing is done to change the market share, question marks will simply absorb great amounts of cash and later, as the growth stops, a dog. - either invest heavily or sell off or invest nothing and generate whatever cash it can. Increase market share or deliver cash
The assumption that cash flow will be determined by a product’s position on the matrix is weak. Some stars will show a healthy positive cash flow as will some dogs in markets where competitive activity is low. *
Treating market growth rate as proxy for...
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